Aiming for Innovative, Affordable and Lasting Solutions: Jordan Affordable Housing Programme (JAH)

Published: Sunday, May 7th, 2017 by Christopher Feather

Jordan Affordable Housing Programme units in Al-Ramtha, Jordan

JAH Demonstration Units in Al-Ramtha, Jordan (2016)

For cities all over the world, the reality is that lack of affordable housing is one of the biggest challenges, especially as more people move to cities. Innovative, affordable and lasting solutions are essentially non-existent. People are often surprised to learn that the Arab world is one of the most urbanized regions in the world. On top of rapid urbanization, the influx of displaced persons from war-torn areas in the region distorts markets and makes urbanization even more complex. Improving job opportunities for resident and displaced youth has become an urgent priority at the same time.

The Hashemite Kingdom of Jordan is one of the countries at the heart of this struggle. With a national housing deficit of nearly 100,000 units, growing housing demand has raised costs for land and building materials. Because of few lower cost options like rental housing, Jordanian households are priced out of homeownership. Add to this over 1.3 million Syrian refugees, most of whom are settling in Jordan’s cities. As a result, monthly rents have risen by two to four times.

The pressure is clearly rising on Jordan’s urban housing challenge. There is an oversupply of housing for upper income Jordanians – a common theme in developing urban markets. With house price inflation, the median house price of 45,000 Jordanian dinar (JD) is inaccessible for lower-middle income earners, especially young professionals and their growing families.

Government alone can’t respond. The country needs innovative and lasting affordable housing solutions that bring in all market participants. Jordan’s complicated circumstances called for unprecedented pragmatism to make affordable housing a reality.

A multi-stakeholder approach led by UN-Habitat

The Jordan Affordable Housing Programme (JAH), developed by the United Nations Human Settlements Programme (UN-Habitat), works with government and housing stakeholders to improve housing affordability and supply for lower-middle income Jordanians and refugees. In its first phase, JAH has shown that low-cost and quality housing can be developed by the private sector with commitments from developers and finance providers.

JAH broke new ground on several ways to minimize housing costs, improve housing design and promote financial access to mortgage credit. To make sure that the program’s results would be practical, there was broad participation at each step. Government agencies, architects, engineers, developers, contractors, financial institutions, development and humanitarian organizations all collaborated closely. This approach helped all the participants engage and “own” the process.

“JAH is ‘value-added’ in bringing all key players together and enabling them to collectively enter a new market for affordable housing in Jordan.”
— Eng. Iman Zaki, UN-Habitat Jordan Program Head

Clear program targets and parameters are key

This multi-disciplinary program’s goal was ambitious: to produce a housing unit at 15,000-16,000 JD for those underserved by the market. This is one-third of the median house price in the country. Program leaders determined that this good quality, low-cost housing could deliver 10,000 units a year to Jordan’s housing market, a 30% increase in Jordan’s current total housing production. If JAH could successfully produce mass affordable housing, the program could be independent and financially sustainable without government subsidies.

JAH determined smaller units were critical to minimize land size and plot use in coordination with Jordan’s engineering and contractors associations. While reducing unit size optimized land use and helped diminish costs, town halls and market research showed that the majority of targeted beneficiaries preferred 100 m2 units.

Unfortunately, this didn’t square with production costs. Construction and land for a standalone 100m2 housing unit would cost approximately 26,000 JD. Without compromising the quality of the housing, JAH pursued innovations in housing design to help minimize costs further.

Optimizing housing size and design to meet supply and demand

With shared plots and incremental construction, JAH produced a starter unit of 65 m2 for 15,000 JD. As the lower-middle income Jordanian household would save additional capital, they could expand vertically with another 65 m2 unit on the second floor for an additional 11,000 JD.

Conversely families with the financial resources could purchase the desired 100 m2 ground floor units for 22,500 JD and then also expand with the second floor option later. The incremental design showed families they could become adequately housed in the short-term with the option to expand in the long-term.

This “incremental build” design minimizes land costs, achieves some densification and offers Jordanian families the ability to earn income on the additional leased unit. The rental income also aims to stimulate the growth of a rental sector. With incentives, these units may also provide affordable rental options to refugees. Planning to house the vulnerable will be explored in JAH’s second phase.

Jordan Affordable Housing Programme - Module Design and Expansion Concept
Jordan Affordable Housing Programme – Module Design and Expansion Concept

Adapting based on feedback on the ground

After two housing designs were developed, JAH worked with the Jordanian Contractors and Construction Association to construct fourteen model homes in four municipalities throughout Jordan. The demonstration units were built to show how smaller units could meet household needs at lower cost with incremental building. The units were also used to attract commitments from developers and financial institutions. Of the visitors who reported their feedback, 93% were satisfied with the demonstration units.

With positive feedback from families and interest from developers, JAH worked with several financial institutions to establish terms for viable housing loans. At town halls and demonstration meetings, JAH encouraged interested prospective beneficiaries to obtain pre-qualification letters from their banks to access the JAH-related housing credit. Salaried borrowers with monthly incomes of 300 JD and non-salaried borrowers with monthly incomes of 500 JD employed in the public and private sectors were authorized for financing at 100% and 80% loan-to-value for the JAH units, respectively. These commitments, at 10-year loan terms from Jordan’s financial sector, were unprecedented, another sign of banks’ interest to affordable finance for these good quality, low-cost units.

Much remains to be done, but JAH convinced us that market-driven, good quality, affordable housing units can be delivered even when there are varied, complex challenges confronting the world’s urban areas. Even when housing realities differ, there are innovative and effective ways to promote affordable housing delivery. The success of JAH’s first phase shows collaboration across stakeholders, particularly with target beneficiaries, residential developers and housing finance institutions, is essential. These actors are critical to the future success of JAH: they will make affordable housing a reality for lower-middle income and vulnerable households seeking decent housing.

Editor’s note: Christopher Feather formerly worked at UN-Habitat as Housing Finance Adviser. Today he is Executive Director for Kalamu Consulting, a financial sector development firm specializing in emerging markets.